(an interoffice email)
On Jan 15, 2008 9:23 AM, Karim Basta wrote:
> US Daily Comment ÃƒÂ¢Ã¢â€šÂ¬Ã¢â‚¬Å“ Tax Receipts: How Good an Indicator?
> Summary: Although Treasury income tax receipts are a popular measure of
> economic activity, they are generally too noisy and susceptible to calendar
> distortions to be very informative. Indeed, the recent strength in
> withholding tax receipts in the fourth quarter (+10.5% year-on-year) seems
> to be largely due to an extra Monday during the quarter. Adjusting for this
> factor, year-on-year growth in withholdings was about 6% year-on-year,
> roughly 3 percentage points below the 2006-2007 average and broadly
> consistent with the data on employment and earnings. In contrast, state
> sales tax receipts are a quite useful measure. While less timely, they are
> also less noisy than income tax receipts and provide information on one
> issue that is poorly covered in the standard economic data, namely
> consumption at a regional level. Recent trends in sales tax receipts are
> consistent with a more substantial consumption slowdown than suggested by
> the national consumption and retail sales data, especially in states hard
> hit by the housing crisis.
Fed tax receipts have been slowing for a year or so, but no sudden drop at year end, just a continuation of the general downslope. Haven’t seen the sales tax graph, but should also reflect gradual fall off in demand.
Twin themes remain: weakness and higher prices.
PPI finished year with largest gain since coming off higher numbers in the early 80’s, and probably 10 years before that when they hit 6% + on the way to higher levels.
Demand is definitely on the weak side, but strong enough to generate alarming price increases in food/fuel/imports/exports.